You've made two good points. I would suggest the next step is to synthesize them. As with many things, moderation is important. A strategy that balances the two downsides is probably better.

Odds are that each group has a bit of dead wood so taking some from each group would be best - identifying that is the harder part for those several rungs higher

As if in today's job market, keeping any engineer provides any sort of guarantee that the engineer will stay with the company "for the future".

Most likely he'll stay until he gets a better offer (if he's a good performer) or gets laid off in a couple of years (if he's a poor performer).

you'd fire 5 older engineers, and 10 young ones.

Fire 5 old and 10 young? QED